Rival group Tattersall's could also be severely affected by the
new tax on the eve of its much-anticipated $2 billion float.

The Government says the extra $45 million it will suck from the
state's 30,000 or so pokie machines every year will be added to its
Hospitals and Charities Fund.

Tabcorp and Tatts each operate about 13,750 machines in the
state, meaning they will both incur an annual $20.63 million
increase in costs.

Kerry Packer's Publishing and Broadcasting Ltd operates 2500
machines at its Crown Casino, which will now cost it an extra $3.75
million a year. Shares in PBL finished down 9¢ at $14.89.

With Victorian gaming, wagering and lottery licence renewals all
under Government review, Tabcorp and Tatts were muted in their
response.

"It's disappointing that our shareholders are shouldering the
burden of the increase in the gaming levy," Tabcorp chief executive
and managing director Matthew Slatter said. Tatts managing director
Duncan Fischer pointed out the group had "directly contributed over
$20 million" to Victoria's metropolitan and regional health system
in the past five years.

Analysts said the market's reaction had been exaggerated.

"Sure, it adds $20 million to (Tabcorp's) costs every year, but
we ran that through our model and it only decreased our valuation
on the stock by 1 per cent," said CommSec analyst Olivia
Cartwright. "Investors are perhaps thinking that . . . Government's
going to be more aggressive on the licence renewals as well."

CCZ Statton gaming analyst Tony Waters said: "There is a view
that Tabcorp is now being seen as a soft touch for the Government
whenever they need extra money. They know it's not really going to
hurt them politically."

Mr Waters said Tattersall's would be worst affected by the new
levy, which equates to nearly 30 per cent of the group's $70.7
million profit for the year to June 30, 2004. By comparison, the
levy accounts for only 2.5 per cent of Tabcorp's expected net
profit for this financial year. "It's got to have a far greater
impact on Tatts simply because they're a lot more reliant on
Victorian gaming machines," he said.

Others said the Government's move might actually reduce the
price for the state's gaming licence when it is renewed in the
2006-07 financial year.

"Doing this actually has some impact on what people will be
prepared to pay the Government for those new licences," one
investment banker said. "You would simply have to factor that extra
levy into your bidding model."